Big Business and Government Need to Pay Small Businesses On Time

Apologies to the Sydney Morning Herald for copying their headline but it is so to the point and so valid.

The article appeared in the SMH, MySmallBusiness section in April and was written by Kate Carnell who is the recently appointed Australia’s Small Business and Family Enterprise Ombudsman.

The article is timely and comes just a week after Rio Tinto announced it was extending their payment times to 90 days. It does seem strange that a company believes they have a right to do that. Surely it is the vendor, not the purchaser who states what the payment terms are, after all, they are providing the product or the service and the purchaser when accepting that product or service should comply with the terms and conditions.

It is tough enough to do business without the customer deciding when and how much they will pay off the invoice they have received.

Kate Carnell uses the example of a small business paying its staff, the management doesn’t call all the staff together in the common room and informs them that instead of being paid as usual, they’ll have to wait another 30 to 60 days before they see their wages. There would be hell to pay, not to mention legal ramifications.

Small business has to pay its creditors, on time or there will be consequences. It should be the same for big business which is generally in a much better position to pay and usually more able to negotiate a loan or overdraft should they need it.

Carnell also quotes a recent U.K report analysing payment times in various countries around the world, where it was found Australian businesses came in well behind the U.S, Europe and the U.K when it came to paying their bills on time on an average of 26.4 days late, in comparison to Japan where on average invoices are paid 6.5 days early.

It isn’t just big business which is guilty of extending payment terms, government at all levels has also been found wanting in this area, though it is stated the Federal Government usually pays on time.

As Carnell says “it is small-to-medium sized enterprises which are the engine room of the economy, so it’s vital they’re able to grow and to employ, and there’s little chance of that if they’re not paid on time.”

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) is currently seeking submissions on issues that small businesses would like the office to investigate and it appears, payment times could shape up to be the subject of their first inquiry.

The ASBFEO has the legislative authority to seek submissions and require documentation relevant to such an inquiry. The subsequent report on payment times in Australia would name and shame those with unfair payment practices.

Other issues affecting small business viability are of interest to the ASBFEO and the consultation period is open for submissions. If you have issues which should be addressed, you can submit your concerns to the ‘thinkBIGsmallTALK’ online interactive platform which can be found at www.asbfeo.gov.au.

Go ahead, be heard because if you don’t speak up you won’t be heard and those problems will continue to take up your valuable time.